Gerry Kennedy: Lonza Biologics

Lonza Biologics’ legal function was in chaos after the management consultants had been in. Steve Hoare meets the man who turned it around

Lonza Biologics is focussed on the production of therapeutic monoclonal antibodies and recombinant proteins produced by mammalian cell cultures,” says its website. Unless you are intimately acquainted with the biotechnology industry, that probably means very little to you.

It also meant very little to head of legal services Gerry Kennedy before he joined the company in the summer of last year. But Kennedy had gained a wealth of in-house experience throughout 15 years at IP-rich organisations and had a lot more to offer beyond his initial three-month contract.

Kennedy has always worked in-house. “I do envy the money that can be earned in private practice, but I know these people have to make big sacrifices. They’re at the demand of their clients and senior partners and billing targets,” he explains.

Kennedy’s colourful career has taken in spells at building materials company Norcross, Thorn EMI division Central Research Labs, tank manufacturer and former Rolls-Royce owner Vickers, and technology company The Generics Group.

In May 2003, Kennedy found himself out of work after two years attempting to launch a wireless networking company spun out of The Generics Group. The company, Quantum Beam, had run out of venture capital money before the sales started rolling in.

After a couple of months playing golf (he would like it in print that he is a three handicap because “it’s not going to get any better”) and playing with his kids, Kennedy realised that there were not that many in-house jobs available for someone with his experience. He decided that he needed a short-term contract to pay the mortgage while he scouted around.

Lonza Biologics needed a lawyer for a short time while the company was going through a period of change. The only problem was that it was only willing to pay for a two or three year-qualified lawyer. “I didn’t mind having to take a massive cut because I thought that’s just how life was going to be for a while,” says Kennedy. So Lonza Biologics got a lawyer with a lot more experience than it was willing to pay for.

Lonza Biologics, formerly part of Celltech, is a standalone company of around 300 employees, which is part of the 2,500-employee chemical company Lonza Group. Lonza Biologics also has a US division of a similar size.

Lonza Biologics’ business is producing drug products for clients such as Cambridge Antibody Technology and Genentec. Most of the companies have in-house development teams, but Lonza Biologics is a contract manufacturer that specialises in the aforementioned monoclonal antibodies. In layman’s terms, these are lab-produced substances that bind to a cancer cell, for example, and kill it.

The reason why Lonza Biologics needed someone so quickly is that the management consultants had been in and instituted a “culture change” to become a “process-driven organisation”.

“It was handled disastrously,” says Kennedy. “It seemed like complete anarchy. When they were trying to decide if people should leave or who should be part of the team, they’d sit round a table and say, ‘I think you should leave because you don’t do this or don’t do that’. It was just the most horrible thing.”

When Kennedy arrived at Lonza there was just one other lawyer left from the original three-person team. There was a redundancy package being offered and all of the company’s lawyers took it. The one remaining lawyer, Annie Blane, was only around for a month to hand over the reins to Kennedy before departing for Bond Pearce.

“The process was just so bad that people were leaving left, right and centre. I was just coming in to put out fires and keep things going,” Kennedy explains.

In addition to the fact that the whole department had disintegrated, Kennedy was not impressed with the reputation that the legal group had within the company. Most thought that it held up the deals that are the company’s lifeblood, a culture that is anathema to Kennedy.

“I’ve heard people in big organisations refer to the legal department as the obstruction department. All the years I’ve been in-house, I’ve tried to get away from that,” he explains. “I didn’t want the department here to be holding people up when we’re dealing with clients. The customers on drug products have certain timescales they have to meet. If they have to do clinical trials by a certain stage, then they have to have certain things submitted to the Federal Drug Administration or the European authority by a certain point.”

Despite the upheaval, Kennedy was thrilled to be doing a job that was keeping him very busy. He also seemed to be changing the perception of legal, as more people seemed to be appreciating what he was doing. After a chat with the finance director, the temporary job was dispensed with and, in November 2003, Kennedy had a permanent salary more in line with his experience.

Kennedy’s initial brief was to get the legal department back on an even keel. “Everyone had gone. We’d lost a lot of knowledge both on the legal side and commercial side. We needed to get to a stage where the work that the legal department was doing was not holding up any jobs,” he explains.

Lonza Biologic’s smallest contracts are worth around £1.5m and it has plenty of competition. Any delay in the legal group could result in customers going elsewhere. “One thing I’ve always wanted from the legal department is to be involved as early as possible. That happens here right from the outset. We work very closely with the project management team,” says Kennedy.

The main issues involved in the deals surround IP and the normal warranties and indemnities. The manufacturing process for these substances is knowledge that Lonza Biologics has built up over a number of years. Sometimes this causes conflicts with customers, who argue that any new IP the company develops the customer should own because they are paying for it.

“That’s not right,” counters Kennedy. “What you’re paying for is our services to develop the product for you. Any new IP that relates to the process, we’ll own. If there’s IP that relates specifically to your product, then we’re happy for you to own that.”

Kennedy will try to explain this to a customer from the outset. He admits that others may view this as a concession, but for him there are no doubts about IP ownership. “From the legal department’s point of view, we’re just trying to close a deal. We’re not trying to win battles against another legal department,” he says. “In the long term, I want to get to the stage where there’s a defined process for the legal department to go in, work with the group on the other side and reduce the time it takes to close out these agreements.”

For the time being, with no lawyers supporting him, Kennedy will call on the services of three law firms. Eversheds and Olswang have had the lion’s share of the work, but Bond Pearce has benefited from recruiting Kennedy’s predecessor Blane. He has instructed the firm on some licensing and academic agreements. “I know that Annie can deal with them easily, having previously worked here,” he says.

When Olswang poached IP partner Michael Burdon and his assistant Stephen Reese from Eversheds in 2002, it muscled in on Eversheds’ relationship with Lonza Biologics. Burdon and Reese were advising it on some long-running litigation. They have also been fairly successful in cross-selling the firm’s other practice areas to the new client. Olswang advised Lonza Biologics on its redundancy programme last year, for example.

But the Eversheds relationship has endured, thanks in part to its recruitment of Sally Shorthose from Clyde & Co last year. “Sally’s great because she used to be in-house at Novartis, so she has a real feel for the day-to-day things,” says Kennedy.

One firm that is unlucky to be missing out is Taylor Wessing. As Kennedy explains: “I’ve known Taylor Wessing senior partner Gary Moss for years. I met him when I joined Norcross, when I first came down from Scotland. I think I’ve instructed Gary in all the companies I’ve been at until I came here, because they’re on the other side of a big patent dispute.”

This is the patent dispute that also brought Olswang and Lonza Biologics together. It concerns erythropoietin, a hormone that prevents anaemia (low red blood cell count) by helping the body make red blood cells. Taylor Wessing’s client Amgen sued Aventis for patent infringement. Lonza Biologics was a separate defendant because it was making the product for Aventis. The case has now gone all the way to the House of Lords and another case is running in parallel in the US.

“That’s quite a useful lesson for us to learn in terms of future deals with customers. We should ask, ‘What’s your position if a third party sues you in relation to your product and we get involved in the litigation?’,” says Kennedy.

The case may also assist with Kennedy’s mission to see the legal department become an integral, respected part of the business. “It’s only when you go through experiences like this and the senior management see what can happen,” he says. He may as well have added “when you don’t listen to your lawyers”.

In the long term, Kennedy would like to bring in a junior lawyer to assist him, but for the moment he is content to slowly bring his own brand of common sense to a company that had succumbed to consultant sense.